Keeping investment goals on track

Many people share a few common concerns about retirement planning – the whims of the markets, longer life expectancies, or simply wishing to have enough to live comfortably in the future.

With all that in mind, where can you find an extra boost to help you reach your retirement savings goal?

Not everyone can simply shift to investments with higher potential returns, if it means increased volatility or exceeding a personal tolerance for risk.

There is a safer alternative to explore: you could opt to save more each year and increase the amount you invest.

To save more — or not — often raises a philosophical question that’s about more than money: is it worth compromising your lifestyle today for a richer life in retirement?

For those who are confident that their goals are on track and are well-positioned for future challenges, there may be no reason to boost regular investment amounts or to alter current spending and saving habits.

But for anyone open to saving and investing more, here are two approaches to deferring spending today in pursuit of reaping rewards later:

Reverse budgeting

Reverse budgeting takes a “pay-yourself-first” approach to saving. You figure out a specific dollar amount you need to set aside from each paycheque to reach a particular goal — in this case, retirement savings. The idea is that before you can even spend your money, the chosen amount is put in the vault. It’s an automatic way to increase your retirement savings and accumulate a bigger nest egg.

With reverse budgeting, tracking monthly expenses is optional. Typically, you don’t need to monitor what you spend unless the pay-yourself-first amount affects your lifestyle or other important investment goals such as education savings.

Analyzing expenses

Budgeting isn’t just for business owners or something to preach to your kids about. Personal finance gurus have been known to say that budgeting is not so much about restricting your lifestyle as it is about giving you the freedom to achieve what you wish.

In its simplest form, you could track and analyze monthly and special expenses with a view to reducing costs in certain areas and directing extra funds towards retirement savings. This may include finding ways to lower monthly fees and costs, such as through bundling phone, TV, and Internet services.

On a more significant scale, it could mean scaling back vacation plans or choosing a less expensive destination and applying the difference to your savings. Your budgeting system can be formal or informal, using whatever resources you have available.

But before you make any big changes, let’s review how well your current savings plans and investments are supporting your financial objectives.

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